Toyota to launch $2 billion EV plant near Shanghai, bolstering Lexus production

TOKYO, JAPAN: Toyota Motor Corp. is set to become only the second carmaker after Tesla Inc. to operate a wholly owned factory in China after it formally agreed this week on a new electric vehicle plant near Shanghai.

The world’s No. 1 automaker plans to produce battery-powered EVs for its Lexus brand at the facility, which should start production in 2027 and have an initial annual output of 100,000 units. Around 1,000 new jobs will be created.

Although Toyota hasn’t disclosed the amount of the investment, Japanese and local media have put it at around $2 billion and say the new factory may lower production costs by as much as 20 percent.

The commitment underscores Toyota’s ambitions in China despite intense competition from local EV makers, which have chipped away at the middle-income market segment once dominated by Japanese auto manufacturers. Assembling EVs at a reduced cost in China would also enable Toyota to export the cars to other countries and reap higher profits.

“We can confirm that a signing ceremony was held in Shanghai between Toyota officials and city officials,” a Toyota representative said on Thursday, adding that construction will start in June.

Lexus unveiled a new version of its ES luxury sedan at the auto show in Shanghai this week, to be sold first to Chinese buyers. The car will be available as a hybrid or as fully battery-powered vehicle, and will eventually be sold in other major markets.

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Toyota is betting that the customer base for Lexus in China will remain strong even as China’s economic growth slows and automakers in the world’s biggest car market increasingly cater to young drivers used to buying more affordable EVs online.

“Nowadays people buy cars like they purchase household appliances,” Kohei Chiashi, chief engineer of the Lexus ES, said. But there was still be plenty of car buyers who visit dealerships and value that kind of service, before and after a sale, he said.

“We cannot betray their trust,” Chiashi said. “At the same time, we need to think about how to incorporate the innovative trends happening in China – that’s our challenge.”

Since it debuted as a US market focused upscale offshoot of Toyota more than three decades ago, Lexus has become a global brand with more than a dozen models, including sports sedans, SUVs and even a minivan. The brand entered the Chinese market in 2004.